Why Australia is not making the most of its China seafood opportunity

Australia's seafood export trade with China is being held back by bureaucratic delays and a blackmarket trade from Hong Kong and Vietnam falsely claiming to be Australian.

The value of Australia's direct seafood trade to China soared to $358 million in 2017 compared with $85 million the previous year after the implementation of the China Australia Free Trade Agreement (ChAFTA).

But a study to be released on Thursday argues that the figure can be much higher if the Australian government intervenes at a senior level to iron out a number of hurdles.

Australia's seafood export trade with China is being held back by bureaucratic delays and a blackmarket trade. Supplied

The University of Technology Sydney report commissioned by the Australia-China Relations Institute-calls for more " high-level representation" from the Australian government to resolve the issues.

The report, The Chinese seafood market: opportunities and challenges for Australian exporters, will be released in Canberra at an event hosted by Trade Minister Steve Ciobo who will give an update on how ChAFTA is benefiting the Australian economy.

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Total Australian seafood exports were just over $1 billion in 2013 compared with $1.4 billion in 2017, largely off the back of soaring trade to China.

Concerns about food safety

Australian rock lobster is the fastest growing seafood export, worth $693 million in 2015-16, while abalone is the second-highest seafood product by value with $182 million worth exported in the same year. Salmon sea cucumbers, live coral trout, crabs and prawns are also popular, the report finds.

Chinese consumers, who are increasingly wanting to buy seafood offshore due to concerns about food safety, are expected to account for 38 per cent of the world's total fish consumption by 2030,

Mike Fabinyi, a senior research fellow at the UTS School of Communications, said an informal, or "grey trade", of seafood from Hong Kong and Vietnam to China was a reputational risk because those products were sometimes marketed as being from Australia.

Chinese people just under 35 kilograms of seafood per household a year. Quentin Jones QCJ

Another issue holding back Australian seafood exports were difficulties getting some products onto the China Approved Species List of Seafood. Out of the 126 species listed, 51 were not caught in Australia or were extinct, the report found.

The approval process was slow and required high-level negotiations between Canberra and Washington to resolve the issue, the report said.

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Holding back exports

It also said quarantine inspection time restrictions and constant changes to labelling regulations, often without notice, were also holding back exports to China, something the wine industry had also complained about.

"This has effectively meant that, despite the reduction in tariffs, many export products are still not legally allowed for direct sale into China," Dr Fabinyi wrote.

Chinese regulations also prohibited the importing of seafood with any level of sulphur dioxide, something that was allowed under Australian regulations in limited amounts.

"Taken together, the prominence of these non-tariff barriers present significant challenges for traders wishing to sell directly to China," the report said. "They therefore are a strong push towards the ongoing prevalence of grey trading.

"As well as presenting a significant risk for Australian exporters, the prevalence of grey trading in China means that it is very difficult to prove traceability of Australian product in China. This means that product from other countries can be marketed as Australian when it does not actually come from Australia.

"The Australian reputation for quality seafood can therefore easily be taken advantage of, without the benefits flowing to Australian producers."

Exporters in a good position

Despite the hurdles, the report said Australia's reputation for high-quality, safe and well-managed products meant Australian exporters were in a good position to respond to demands for environmentally sustainable seafood in China.

Chinese people eat seven times more seafood – just under 35 kilograms per household a year – than they did in 1978. This compares with Australia's per capital consumption of 26 kilograms, 21.5 kilograms in the United States and Japan's 48.6 kilogram.

While ChAFTA means there will be no tariffs on Australian rock lobster, abalone, sea cucumber or atlantic salmon imports into China from January 1, 2019, Beijing's anti-corruption crackdown has hurt demand for highly-priced seafood such as rock lobster, which is more expensive that North American lobsters.

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Michael Smith writes on news specialising in Asia, the world, business and trade. Based in Shanghai, Michael has more than 20 years experience as a journalist. Prior to his posting to China, he was The Australian Financial Review's deputy Chanticleer columnist. Connect with Michael on Twitter. Email Michael at michael.smith@afr.com.au